Analysts from Wood Mackenzie's energy and metals teams have collaborated to identify the major events in 2013 that could materially impact the long-term energy and metals landscape.
Their report addresses the cross-commodity implications for these key industry issues.
According to the research firm, 2013 is set to be another vibrant, complex and challenging year for the energy and metals industry. As emerging market growth slows and the developed world continues to grapple with its own economic problems, commodity markets are seeking direction. Market dislocations are challenging, but also represent an opportunity to develop new markets. Technology, infrastructure and regulation could facilitate or hinder the extraction value in these new markets. The need for resource-rich countries to maximise revenue to balance budgets is opening up access to new provinces. Oil and gas companies continue to invest in new supply despite the threat of further downward price movements.
The firm said that Europe has endured four years of recession "recovery", but in the process has borne a structural downward shift in energy demand. Navigating the next 12 months without incident will be challenging, and there is little chance of events in Europe sparking a resurgence in global energy demand.
Europe's total energy demand has fallen 5 per cent since 2008, and this structural downward shift is permanent: final demand for energy will not return to pre-recession levels before 2030. Europe is struggling to adapt to this new era of austerity and low demand, and falling trade is contributing to problems in emerging markets.
Meanwhile, China must prevent its economy from slowing too quickly, and the growth engines of India and Brazil are stalling. The acute threat posed by a euro-zone banking crisis has receded, but 2013 remains risky for Europe, and its impact on the rest of the world.
Wood Mackenzie's analysts also believe that China's economy is slowing, and 2013 will determine if this is a successfully managed transition to a new phase of development.
China's economic growth remains vitally important for global metals demand and longer-term trade flows. Mandated by Beijing's 12th Five-Year Plan (2011-2015), the investment-driven boom of China's last decade is moving from the prosperous south and east of the country towards the relatively undeveloped western interior. As cities and infrastructure are built in Hubei, Hunan and beyond, the economies of Beijing and Shanghai will rebalance towards the consumption-driven model of the developed world, implying a structural change in China's commodity demand.
Slowing growth will be offset by a base level of consumption an order of magnitude greater than a decade ago, the consulting firm said.
Meanwhile, infrastructure is the key to North American oil supply growth. The growth of unconventional oil and gas promises to push North America towards energy independence. Pipeline politics are key for 2013, dictating whether North American supply growth can be maintained, and how quickly the region will adopt a new, potentially disruptive role at the heart of global energy trade flows, the study predicted.
Unconventional supply has transformed the US natural gas industry over the last decade. More recently, gas-oil pricing dynamics have helped incentivise drilling in liquids-rich plays; tight oils now threaten a revolution in the crude oil market. In Canada, oil sands development continues apace. Primary energy demand is stagnating, US legislation prohibits exports of crude oil, and pipeline infrastructure is failing to keep pace with supply. In 2013, decisions are expected on two oil pipeline projects. Keystone XL would transport Canadian oil sands to refineries on the US Gulf Coast. The pipeline would also have the capacity to move North Dakota's tight oils south.
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